Apple: Can They Play Defense? Asks UBS

By Tiernan Ray

UBS’s Steve Milunovich this morning reiterates a Buy rating and a $600 price target on shares of Apple (AAPL), while asking if the company has an “identity crisis” because it seems to be in the unusual position of “drawing significant and competent competition.”

Under late founder and CEO Steve Jobs, the company “was all about focus,” eschewing many projects and choosing just “great ones,” and as a result, Apple historically has played the role of underdog, beginning with its niche Mac status after losing out to Windows. The iPod took over the MP3 player space but was never much threatened before the music function was subsumed into the iPhone.

Milunovich thinks that Apple won’t do anything precipitous, and so investors must be “patient”:

Yet now that the company is so large due to iPhone success, investors are clamouring for product expansion with larger as well as lower-priced phones with Android gaining favor. Innovation remains the key […] Perhaps Apple will meet its internal need for differentiated product while covering more product space to grow revenue as it did with the iPod. If not, it probably will err on the side of yielding revenue dollars though giving up less in profit share. The only way out might be innovation in new categories, which will require investor patience. Most companies would rush out a 5-6” phone; Apple probably won’t.

Apple shares today are rising with a robust overall market, up $7.25, or 2%, at $427.30.

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